China’s yuan risks ‘skewed towards further weakness’ as Beijing seeks to shore up economy under zero-Covid strategy
- The yuan has depreciated by more than 1 per cent this week and by nearly 2 per cent this month, with policymakers concerned with stabilising prices and employment
- The onshore yuan weakened past 6.49 per US dollar for the first time since August, closing at 6.4875 on Friday
Beijing’s preoccupation with domestic issues has fuelled speculation of further yuan weakness and volatility, with economic disruption continuing amid China’s zero-Covid strategy and a looming rate increase by the US Federal Reserve next month.
The Chinese currency had already reported a significant weakening this week, with its official midpoint set 0.8 per cent lower at 6.4596 per US dollar on Friday, which was already the lowest since October.
“The greater elasticity of the yuan exchange rates in recent years has effectively and timely eased external pressure,” Wang Chunying, deputy head of the State Administration of Foreign Exchange, said on Friday.
“As companies become more rational in [foreign exchange] settlements, it will help the overall stability of yuan exchange rates and the stable operation of the [foreign exchange] market.”
The risks to the currency remain skewed towards further weakness in the near term
The offshore spot rate was reported at 6.53 per US dollar on Friday evening, while the onshore rate weakened past 6.49 for the first time since August. The onshore rate closed at 6.4875 on Friday.
